The UK has Value-Added Tax which has a dual charge, the introductory rate of VAT is 17%, and the additional rate of VAT is levied on many goods and services bought and consumed in the UK. It is based on how much the item is worth and not on how much you think it would cost you to buy it, so the more expensive the article, the higher the additional rate of VAT you will pay. This means that most items in the shop are priced at a low VAT rate, but many more are priced at higher VAT rates. This is why shopping in London can be expensive because it has a higher VAT rate than anywhere else in the UK. So how do you account for these additional charges?
Goods Sold to Consumers
Value-Added Tax is simpler than it sounds, though you have to go about it step by step to get your way around it and learn to handle it effectively. VAT is charged on: goods sold to consumers (i.e., staff canteen food) sales, new products added to the existing stock, improvements to existing production, specific domestic production, and imports. The goods sold on the same day to the same customer should be priced using the standard rate of sole traders VAT, and any other chargeable item added to it will be priced using the zero rate of Value-Added Tax.
Standard Rate of Value-Added Tax
Most small businesses are not fully aware of the standard rate of Value-Added Tax, which means that they often undervalue their goods. They don’t realize that this undervaluing is a valuable strategy for ensuring that when they become profitable, they don’t lose their attractiveness to consumers and allow the competition to push them off the market. An excellent way to make sure that you don’t undervalue your produce is to obtain a copy of your turnover and profit account and look at it. You will see that most of your profits come from exports, and many small businesses don’t understand the full impact. If you do not have a high enough turnover to account for a large percentage of your overall business value, you may need to increase your business rate of VAT.
Price of your Goods to Sell
When setting the threshold price of your goods to sell, you must ensure that you don’t undervalue your merchandise by more than 25% of the total turnover that you make. This is because some trades are not allowed to pay vat on items purchased from other retailers. The government can enforce this law by banning retailers from selling things they cannot sell and have imported from other countries that are not Value-Added Tax registered. To avoid being banned, you should make sure that your customers know that you do not charge over the standard rate of VAT, and if they want to pay more, they are free to do so.
Register with the HM Revenue and Customs
If you intend to run your business from Northern Ireland, you must register with the HM Revenue and Customs. You must report all of your trades to avoid paying excess tax and paying vat for goods and services that you have imported or exported. If you are a retailer that sells goods online, you will need to prove that you have a permanent address in Northern Ireland when you are completing the online application. If you are a member of a business, such as a supermarket, you will also be subject to Income Tax and VAT.
Items Include
Some items include clothing, electrical goods, kitchen appliances, and food that has been prepared outside the scope of vat. Certain meals, like fish and chips, will still be subject to a Value Added Tax (VAT). Foods that consist of meat, fish, vegetables, and bread are all generally exempt from Value-Added Tax. These items include tea, coffee, butter, cheese, milk, and wine. Certain catering services are also exempt from paying any income tax, including waiters, waitresses, and bell boys.
Zero-Rate Scheme
Another way that you can benefit from introducing the zero-rate scheme is that you will no longer need to keep VAT records on hand. If you are required to keep such records, it can prove to be highly time-consuming, and you may find that you miss out on certain tax credits because you didn’t keep your records current. Using a cash accounting scheme will not have to worry about such issues. The new laws for VAT that were brought in last year mean that all retailers can buy directly from suppliers and therefore avoid having to pay income tax. The amount of tax that you pay will depend on which tax band you fall into, so if you have very high earnings, you may have to pay a higher tax rate than those with lower incomes.
Conclusion
You can claim a refund for all of the income tax that you have paid over the year, regardless of whether you have paid the total amount or not. In addition to claiming refunds, you can also claim payments back for items you have bought that have been classed as zero-rated goods. An excellent example of this is jewelry or clothing purchased over a particular period, even if it did not fit into the main category that is considered zero-rated. With the introduction of the new system of VAT, which comes into force from this April, the UK will be one of the most progressive countries in terms of its tax system, with the majority of the changes being for the better.
